First-time buyers who are currently renting could find it easier to get onto the property ladder now that rental payment information will be included on their credit reports.
Credit reference agency Experian has announced that rental data, such as when payments are made and how, will appear on the credit reports of more than 1.2m tenants in the UK.
Research by Experian found that four out of five tenants (79%) would see a noticeable improvement in their credit score when lenders take rental data into account, potentially boosting their chances of being accepted for a mortgage. The proportion of tenants that could prove their identity online when rental data is added increases from 39% to 84%.
How rental information is collected
More than 150 social housing providers, local authorities and letting agents will report rental data into the new scheme, which is called the Rental Exchange. This is a joint initiative created by Experian and Big Issue Invest, the social investment arm of The Big Issue Group, which incorporates a tenant’s payment history into their credit file at no cost to either the housing provider or tenant.
Experian will also work with the winners of the HM Treasury Rent Recognition Challenge, which was set up to encourage companies to come up with ways to help renters improve their credit scores.
The three companies that won the competition, receiving £2m of government funding, have built apps which enable renters to record and share their rent payment data themselves, such as when they’ve made payments and how much they’ve paid.
Clive Lawson, managing director of Experian Consumer Services, said: “We’re proud Experian is the first credit reference agency to add rental payment data to credit reports, leading the way in helping people understand their financial health. Tenants pay a significant amount of money each month for the roofs over their heads, so it’s right to recognise these regular payments in a similar way as mortgages.”
Experian’s move follows a petition last year which called for regular rental payments to be recognised as evidence that mortgage re-payments can be met. The petition was signed by 150,000 people.
Rental payments to appear on credit reports for first time